UBS Libor traders face criminal charges

UBS AG will pay about $1.5 billion and two former traders face prison as the bank settled charges with U.S. and U.K. authorities for manipulating interest rates in a global conspiracy to boost profits and bonuses.

Tom Alexander William Hayes and Roger Darin were charged with conspiracy in a criminal complaint unsealed today, the U.S. Justice Department said. Hayes also was charged with wire fraud and a price-fixing violation for manipulating the London Interbank Offered Rate at another bank, the department said.

“Make no mistake, for UBS traders, the manipulation of Libor was about getting rich,” Assistant Attorney General Lanny Breuer, the head of the Justice Department’s criminal division, said in a news conference in Washington.

The charges are the first brought by U.S. officials against individuals alleged to have manipulated Libor and comparable benchmarks in Europe and Japan.

The U.S. Commodity Futures Trading Commission’s $700 million fine is the largest in the agency’s history, David Meister, the commission’s head of enforcement, said at the news conference. The total penalties of $1.5 billion represent about one-third of the bank’s 2011 net income.

UBS fell 0.3 percent to 15.20 francs in Swiss trading after rising as much as 2.4 percent during the day.

Conspiracy, Fraud

The U.S. government said the two men were part of a conspiracy to commit wire fraud from September 2006 to 2009. Hayes, 33, served as a senior yen swaps trader at UBS in Tokyo, while Darin, 41, worked as a short-term interest rates trader at UBS in Singapore, Tokyo and Zurich, the U.S. said.

Prosecutors allege that Hayes and Darin “conspired with others known and unknown within UBS to cause the bank to make false and misleading yen Libor submissions to the British Bankers’ Association.”

Darin didn’t respond to a voice-mail message, and Hayes couldn’t be reached. U.K. fraud prosecutors arrested Hayes last week in connection with a criminal probe opened this year, according to people familiar with the matter.

UBS was ordered to pay a total of about $1.5 billion to U.S., U.K. and Swiss regulators for trying to rig global interest rates, including Libor. Regulators found that traders at the Zurich-based bank made more than 2,000 requests to its own rate submitters, traders at other banks and brokers to manipulate rate submissions through 2010.

UBS Japan agreed to plead guilty in connection with the rate-rigging investigation, while UBS AG, the parent company, entered a non-prosecution agreement with the Justice Department.